You have been hired as a financial consultant by Himalaya Ltd. The CEO, Ms. Natasha Romanoff has just returned from a conference of top managers, held at a prestigious University in Australia where the issue of share buy-backs, dividends, and earnings per share (EPS) were debated. She was particularly puzzled after hearing the quote below: Share buybacks (repurchases) are going into the market and pumping up the price of your shares by using your own cash, not to invest in business. - (Elizabeth Warren, U.S. Senator, 2021) Required: In light of the above statement write a short memorandum format report to the CEO, Natasha Romanoff to answer the following four questions raised by Ms. Romanoff. i. Discuss what dividends, EPS and share buybacks are? ii. Discuss at least TWO reasons why companies pay dividends to shareholders? iii. Based on the statement above by Elizabeth Warren (U.S. Senator) critically evaluate why companies may consider buying back its own shares. iv. Discuss at least TWO accounting implications of share buybacks?
You have been hired as a financial consultant by Himalaya Ltd. The CEO, Ms. Natasha
Romanoff has just returned from a conference of top managers, held at a prestigious University
in Australia where the issue of share buy-backs, dividends, and earnings per share (EPS) were
debated. She was particularly puzzled after hearing the quote below:
Share buybacks (repurchases) are going into the market and pumping up the price of your
shares by using your own cash, not to invest in business. - (Elizabeth Warren, U.S. Senator,
2021)
Required:
In light of the above statement write a short memorandum format report to the CEO, Natasha
Romanoff to answer the following four questions raised by Ms. Romanoff.
i. Discuss what dividends, EPS and share buybacks are?
ii. Discuss at least TWO reasons why companies pay dividends to shareholders?
iii. Based on the statement above by Elizabeth Warren (U.S. Senator) critically
evaluate why companies may consider buying back its own shares.
iv. Discuss at least TWO accounting implications of share buybacks?
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